Interest rates may be bottoming out and companies may no longer have the opportunity to save on low interest costs, but Corporate India still thinks that there's plenty of room to save on costs.

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Chief financial officers of major corporations that Business Standard spoke to cited opportunities to cut costs in the areas of labour, salary bills, power and working capital, among other things.

There is always scope for strategic cost management: Y M Deosthalee, CFO, Larsen & Toubro Companies should look at a reduction in the total cost of capital through a better mix of debt and equity: D D Rathi, CFO, Grasim Industries Companies will relentlessly work towards bringing down their material costs, overheads and fixed costs like salaries : Pravin Kadle, executive director, corporate affairs, Tata Motors

Indeed, the three main focus areas for companies in 2004 will be cost cutting, business restructuring by focusing on the core areas and increasing globalisation (read: acquiring plants overseas and running them at low costs).

Indian Inc saved Rs 5,138 crore (Rs 51.38 billion) in interest costs last year and repaid Rs 8,088 crore (Rs 80.88 billion) in loans. With interest rates bottoming out, savings on interest cost may not help companies boost their top lines any more.

However, companies are unfazed and say the right strategies are already in place to continue the growth story.

According to Y M Deosthalee, CFO, Larsen & Toubro, cost cutting to promote profits has not yet been fully exploited. "There is always scope for strategic cost management in Indian companies," he says.

Companies could wield the axe on labour and power costs this year. Says Adesh Gupta, president & CFO, Indian Rayon: "India is not yet known as the lowest cost producer in many sectors and there is a lot of room for further cost reductions."

Pravin Kadle, executive director, corporate affairs, Tata Motors, points out that companies will relentlessly work towards bringing down their material costs, overheads and fixed costs like salaries.

P K Ghose, CFO, Tata Chemicals, feels that although interest costs have bottomed out, there still is an opportunity for reducing costs through a further reduction in working capital.

"The high labour costs in manufacturing plants can be trimmed," he adds.

Most corporates agree that further reductions in interest outgo will not be easy but refinancing high cost debt will continue adding to the bottomline.

Says D D Rathi, CFO, Grasim Industries: "Since most corporate debt is locked in for the long term, the impact of lower interest rates is spread over a period of time. Also companies should be looking at a reduction in the total cost of capital through a better mix of debt and equity."

Kadle of Tata Motors feels that part of the benefit of the reduced interest rates will be experienced in this year too because many companies borrowed in a big way only in the second half of 2003.

"The benefits of swapping high cost debt with low cost debt will also be accrued through 2004. Many companies have been shy about borrowing in 2003 and so we can expect a lot more companies to go in for borrowing this year," he points out.

Deostahlee says that effective derivative hedging is not utilised to its full potential in India as yet and corporate treasury management can still help in reducing the average cost of borrowing considerably, even though interest rates are expected to remain flat.

Restructuring of businesses and focusing on core areas by companies will also boost profits. "Expansion of businesses is also a strategy to be adopted by the corporate sector as there is immense scope for capacity creation across most industries," Rathi of Grasim Industries says.

Most corporates feel that with the World Trade Organisation rules coming into force in 2005, cost competitiveness has become very critical.

Points out Ghose of Tata Chemicals: "Another way to improve bottomline growth is to look at globalisation -- that is, acquiring inefficient plants and running them at low costs. Opportunities lie in south east Asian countries like Malaysia, Indonesia, Bangladesh, Sri Lanka, and one does not rule out the US and Europe."

The advantage of information technology has not been completely utilised, Deosthalee of L&T admits.